Each year, in the month of November, ACG "Smart Parts" focuses on providing our readers an automotive industry update with an analysis of what we have seen thus far in the current year along with a perspective of what we can expect going forward into, in this case, 2021.
We will provide our readers with data, opinions, perspectives and opinions from respected industry analysts as well as our own experiences here at ACG "Smart Parts" with our dealers over this past year. We will break down our update in three different sections as follows.
Our first section of the update will be an overall update on the automotive industry in general based on new and used vehicle sales data and predictions from NADA's Market Beat Report from September 2020. This data from NADA will give us information from the automotive production side as well as unit sales thus far in 2020 and predictions going forward.
Our second section will focus on the parts industry specifically, including the automotive dealership level and the aftermarket parts levels provided by the McKinsey Global Institute, including data and predictions for the automotive parts industry as it stands now and looking ahead.
Lastly, our third section will provide our readers our own data and experiences from an ACG "Smart Parts" perspective with our own dealers here in the U.S. and around the globe.
This unique perspective will give our readers a "hands on" view of what's really happening out "in the field". We will review what our dealers and their employees are experiencing from many different market areas and the actual affects this pandemic has had on them.
The Covid-19 Pandemic has definitely impacted our industry and most important, it has impacted our lives in all aspects. It is not our intention to tell you what you already know, rather, we want to give our readers "information" that will shed light on just what has happened from an industry standpoint and to help us to prepare going forward.
Our goal is to try and answer the following question...
"Where Are We Now And Where Are We Going?"
Many of you may already have an opinion or answer to those questions, but the information we will be looking at may help in our thought process going forward. Even though we have already gone through a lot during this pandemic, the automotive industry still remains strong and resilient.
Here We Go!
Section One: NADA's Market Beat Automotive Industry Update
First of all, I would like to recognize NADA for providing the following data and information concerning new & used vehicle sales through September of this year as well as their predictions going forward. The following information is readily available and in more detail at their website, (www.NADA.org)
The Covid-19 Pandemic has obviously impacted new & used vehicle sales, but the good news is that sales have been steadily climbing this year with sales of 16.3 million units in September, the highest since February, finally topping the 16.0 million mark. Even though overall, sales are down 4.3% from September 2019, with overall decline this year at 31.9%, the trend is looking positive.
The good news is that the decline percentages continue to shrink with predictions of increases in sales to climb even higher on into 2021. The biggest reason, believe it or not for the sales declines were not due to customer demand, as plant closures due to Covid-19 limited production and dealers not receiving or re-stocking their inventories.
In addition, model year changeovers also put pressures on overall inventory levels, but as of the end of September, inventory on dealer lots totaled 2.66 million units, which was up 3.6% over August 2020, but down overall by 26.7% from September 2019. We still have a ways to go, but the signs are that we are on the comeback trail in a consistent fashion.
Along with this continued increase in production, it is supported by increasing consumer confidence and lower interest rates, thus promoting dealer sales and after sales with more trade ins supporting the used vehicle inventories. Much of the year thus far has seen dealers desperately seeking used vehicles to offset the lack of new inventory and trade ins.
Market share increases were also seen for GM, Ford, Hyundai-Kia and Subaru, while Honda and Volkswagen remaining the same with their market share numbers. Toyota, FCA and Nissan suffered the biggest declines in their market share numbers.
Light Duty Truck Sales continue to dominate the light vehicle market as the only category to show a year to year overall increase, even through the Covid-19 Pandemic.
Section Two: Dealer & Aftermarket Parts Industry Update
Once again, we would like to recognize our resource, McKinsey & Associates, (www.mckinsey.com) for their data, research and predictions for our industry update on the dealer and aftermarket parts industry update. We all know that our first section on the overall new & used vehicle industry update has a huge impact to our automotive parts industry.
First of all, we have all experienced the direct effect of the manufacturer plant closures, parts shortages and vendor shut downs that Covid-19 has caused. With that said, we can now look at we may not know about the parts industry in general and what we can possibly expect going forward.
In the past, the automotive parts industry has been pretty resilient during any crisis, even when we consider the financial crisis we all experienced back in 2007-2009. Back in that particular crisis, people delayed major purchases such as homes and new or used vehicles. This actually put emphasis on repairs to existing vehicles resulting in higher parts and service sales.
In that last recession of 2007-2009, we realized GDP declines all over the world, resulting in substantial declines in new and used vehicle sales. But in retrospect, some are actually predicting that this Covid-19 Pandemic could cause a more substantial negative effect to our automotive parts industry.
According to McKinsey & Associates, there are some new factors that have not been evident in any past crisis. People are driving less, as much as 50% less in certain areas. This reduction in miles driven results in fewer collisions, lower traffic numbers, lower public transportation and even higher use of e-commerce platforms.
These numbers and analogies don't just apply here in the U.S., they also apply around the globe as the Covid-19 Pandemic has impacted everyone. Many analysts also predict that many of these impacts will result in changes that may never go away and become the "new norm" going forward.
On the other hand, some of these changes in our habits such as social distancing along with a general new awareness could cause a spike in sales. With public transportation being reduced due to this new awareness, new and used vehicle sales may actually rise. Even though less miles may be driven, the overall individual vehicle purchases may increase with less people using public transportation.
Also, with the reduction of overall new vehicle sales, even though they are on the comeback as mentioned in Section One, the increase in used vehicle sales could promote more parts sales as older vehicles requiring more repairs will result in higher parts sales.
We've already seen a spike in aftermarket service contracts, as manufacturers warranties would decrease due to lower new vehicle sales. All pointing to higher dealer and aftermarket parts sales, including accessory parts sales.
Another big factor to consider would be our trade agreements with other nations that could impact overall parts distribution and sales worldwide. Just the introduction of the USMCA versus NAFTA could have a huge impact on parts distribution, pricing and overall sales here in the U.S.
McKinsey & Associates also notes that Automation will play a much bigger role in our parts industry going forward. With the disruptions in the labor force, and more attention paid to social distancing and reduced infection risk, manufacturing, distribution centers and warehousing may become more automated.
Bottom line is that in order to survive and climb out of any crisis, we all have to adapt and change to whatever the environment is and whatever the market bears. As competition increases, so will the landscape and the players. Downsizing and consolidation may be front and center in order to remain efficient and profitable.
Section Three: An ACG "Smart Parts" Industry Update & Perspective
This year has definitely been one for the ages ond one that we will never forget for many reasons. In this, our final section, we will provide a perspective that all "Smart Parts" Readers can relate to as I refer to this section as the "Real World Section".
Working with our Owners, Dealer Principle, Parts Managers, Service Managers, Collision Center Managers, Service Advisors, Parts Counter Staff, Office Managers & Staff, Sales Managers, Cashiers, Drivers, Porters, Body & Service Technicians, etc. directly has given me a unique perspective in all areas of the dealership and not just Parts.
First and foremost, Dealer Owners have not only had to survive, (and still surviving) the Covid-19 Pandemic, they've had to survive in general. Decisions had to be made in order to stay in business while trying to protect and secure their employees.
After the initial impacts of the Covid-19 Pandemic were felt in the first few months, we noticed that dealerships were starting to emerge as sales started to increase. The amazing thing was not only were sales increasing, they were increasing to higher levels from the previous year numbers in the same months once we hit the mid-year point.
Parts Departments were doing their best to find parts during factory shutdowns wherever they could to provide the best customer service, even at higher costs. Parts inventories became leaner and dealer owners were taking more interest in their Parts Department's performance and overall investment.
As mentioned in our last month's issue of ACG "Smart Parts", parts inventory reconciliation between the Account Ledger Balance Inventory and the D.M.S. Controlled Inventory seems to have become center stage as the dealers investment discrepancies went in the wrong direction.
Due to the disruption of normal parts receipting and accounting integration practices, discrepancies were on the rise during this pandemic. The number of parts vendors also rose due to "get the part by any means" became a normal phrase in our Service and Collision Center departments. All leading to a "Pandora's Box" during the pandemic.
Even though all of our dealers and all their employees had to endure, and still enduring this pandemic, overall...sales are coming back to normal expectations. Even though, many of our dealers are operating in understaffed conditions.
It's always been tough to find qualified staff, especially technicians, it's even more so during these times. That being said and going forward, there can never be a more appropriate time than now to focus in training at every level and promoting from within if applicable.
Lastly, and most important, I've never seen a time where our dealers and their employees working harder than ever before to be the best they can be, no matter what the circumstance.
Doing more with less is definitely evident in all of our dealerships that we partner up with and their results are proof that no matter what we face in our industry, the Industry Updates will always positive!
If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at (786) 521 - 1720...After all, not knowing is not worth not "fixing" it...